AML and what it means …

The 1st July 2018 brought a significant change for law firms and other professionals. The Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (AML/CFT Law) came into effect meaning that law firms and professionals have had to change their procedures in relation to client information gathering.

This law is part of a global initiative and its purpose is to demonstrate New Zealand’s commitment to take counter measures to prevent criminal activity and to bring those who partake in such criminal activity to justice.

In the past the services of law firms and other professionals has been targeted and used by money launderers to clean money.

There are certain “captured activities” that fall under the Act, including, but not limited to property and commercial based dealings that may involve the transacting of money through a lawyers trust account.

Law firms now have an obligation to assess clients’ degree of risk, verify certain client information and to report any suspicious behaviour in relation to the use of their services. These steps to be taken by law firms are called Customer Due Diligence (CDD) and are required for both new and existing clients.

There are different degrees of CDD required depending on the initial assessment of risk of that particular client, these can either be simple (in special cases), standard, or enhanced (where a client’s type of work is deemed to have high risk).

In most instances law firms will be required to verify a client’s:

• Full name;
• Date of birth; and
• Your address.

To verify these things clients may be asked for proof, such as a driver’s licence, passport, or birth certificate and a bank statement to prove a client’s address. It is also possible that a firm may require verification of the source of the funds that a client is using to undertake certain actions.

Further details will be required for trusts and companies, and some by virtue of their nature will automatically require enhanced CDD. Generally, there will be a requirement to obtain the information of all controlling persons. These people could include, but are not limited to Directors, shareholders with a more than 25% shareholding, trustees and/or beneficiaries.

CDD is legally required before a law firm begins to act for a client or conduct work for an existing client in a materially different form. If, for whatever reason some of this information cannot be verified to the extent required, law firms and professionals may not legally be able to act.

Prospective and current legal clients and professional customers should be aware of these new requirements and be prepared to make this information available at the earliest opportunity, as this can speed up what could be a lengthy process in certain circumstances. Thus, creating a far more satisfactory professional relationship between firm and client.

(Article by Hayley Willers and Leon Arcus, DTI Lawyers)